What is a stock-out?

The direct cost is the profit you did not make. A shop sells 5 bottles of laundry detergent a day, and each bottle earns $3 in gross profit. The shelf is empty for 3 days.

• Bottles not sold: 5 x 3 = 15
• Profit missed: 15 x $3 = $45

That is the small part. Customers who came for detergent often buy their other groceries elsewhere on the same trip, and some do not come back. The true cost is usually higher than the profit on the one product.

• Ordering too late. Nobody checked, or the shelf looked fine until it did not.
• Underestimating demand. A holiday, a rumour of a shortage or a competitor closing can double sales.
• A late or short delivery. The supplier sent fewer cases than the invoice said.
• Wrong counts. The records said 12, but theft or damage had left 3. See shrinkage.

Most of these come down to not knowing the true number in time. A reorder point per product, and enough safety stock, prevent the majority.

The usual overreaction is to stock up on everything, which trades stock-outs for overstock and tied-up cash. Fix it product by product. Protect the fast sellers, accept an occasional gap on slow ones, and keep a note of what customers asked for and did not find.

Shopkeepa lets you set a low-stock minimum for each product and sends one reminder when stock crosses it. The restock list and the low and out-of-stock report show what needs attention. See low-stock alerts.